Online ad revenues may be getting squeezed by the law of large numbers and the dismal economy, local media sites are still expected to thrive this year, rising 50 percent to $13.1 billion this year, according to a report provided to paidContent by analyst Borrell Associates. Of course, as the law of large numbers tamps down growth rates for online in general, the local web has plenty of catching up to do. Still, Borrell says that this latest forecast — made up of over 3,000 local media properties surveyed by phone and email over the past year — has been revised upward from its initial take back in December.
— Local growth levels off in 2012: Local sites’ growth is being attributed to local media companies selling ads directly for their own web properties. Most of it, however, comes from pure-play companies delivering lower-cost ads that intercepts consumers not as they are reading news online, but as they are using the web to research products and prices. Additionally, economic pressures are also prod marketers to abandon their long-time spending patterns and seek out other methods of reaching consumers, hence the attraction to the local web, Borrell says. But as the report shows, local online ad revenues will peak in 2010 with $21.6 billion. And in 2012, growth will start to level off around $22.9 billion. More details from the report after the jump.
— The end of convergence: Over the past few months, websites belonging to local TV and radio stations, as well as newspapers to some extent, have been developing identities independent of their traditional media versions. Borrell, which has warned that convergent ad sales dilute the revenues for online media, finds that by loosening their ties to old media, local web outlets have been able to realize higher gains.
— Internet yellow pages protects its turf: The online directories category is projected to see $1.2 billion in revenue this year, a 20.8 percent increase over 2007’s $993 million. The category will comprises a 7.8 percent share of the local online ad spend pie (pure-play takes up the largest slice with a 57.3 percent share, followed by newspapers at 24.6 percent; broadcast TV is behind directories with 6.9 percent). So while internet yellow pages are experiencing steady growth, they are facing increased challenges from newspapers.
— Newspapers’ Achilles heel: Newspaper sites’ heavily reliance on classified ads for online revenue, mostly in the form of up-sells to print listings has caused some pain. Borrell: “This addiction is understandable, given the high margins associated with this type of revenue, but it is also their Achilles heel. Print classifieds are notoriously vulnerable to online competition, and as that pond dries up, up-sells evaporate with it.” On average, newspapers in 2007 received 41.9 percent of their online revenue from recruitment advertising, 10.7 percent from automotive, and 10.4 percent from real estate. Nevertheless,this year, newspapers are expected to take in $3.7 billion in revenue, a 19.4 percent increase over 2007’s $3.1 billion.
— TV station sites to exceed $1b: For the first time, average online revenue for large-market stations broke the $1 million barrier. Fifteen percent of the stations in Top 20 markets were getting at least twice that. Total TV web revenues grew to $772 million, 72 percent more than in 2006. This year should see online ad sales surpass $1 billion for local TV stations as they start to develop internet-only sales reps. Stations nearly doubled their Web sales forces in 2007 and are expecting to do the same in 2008 — although Borrell points out that